Amdocs Limited

Thank you for standing by. Welcome to the Amdocs first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Matt Smith, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Before we begin, I need to call your attention to our disclaimer statement on slide two of the presentation. It notes that some of our comments today may be forward-looking statements and are subject to risks and uncertainties, including as described in Amdoxy's FTC filings and that we will discuss certain financial information that is not prepared in accordance with GAAP. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer you to today's earnings release, which will also be furnished with the SEC on form 6K. Participating on the call with me today are Shuki Sheppard, President and Chief Executive Officer of Vandox Management Limited, and Tamar Rappaport-Dugin, Chief Financial and Operating Officer. To support today's earnings call, we are providing a presentation which can be found on the investor relations section of our website. And as always, a copy of today's prepared remarks will also be posted immediately following the conclusion of this call. On today's agenda, Shuki will recap our business and financial achievements for the first fiscal quarter 2026, including our strategic progress in generative AI and data services. Shuki will finish by addressing our financial and business outlook, after which tomorrow We'll provide additional details on our first quarter financial performance and guidance for the fall fiscal year 26. And with that, I'll turn it over to Shuki.

Thank you, Matt, and everyone joining us on the call today. Beginning on slide six, I am pleased to report a solid start to fiscal 2026 as we continue to focus on our primary goal of accelerating Amdoc's long-term growth and position of ourselves as a market leader for the Gen AI era. First quarter financial results were consistent with our expectation. Revenue of 1.16 billion was slightly above the midpoint of guidance, rising 4.1% from a year ago and 3.5% in constant currency. Profitability improved by 40 basis points from a year ago and was unchanged on sequential basis, reflecting our commitment to balance internal efficiency gains with accelerated investments to support long-term growth. Non-GAAP diluted earning per share was $1.81 above the guidance range, primarily due to a lower than expected tax rate for the quarter. And we finished Q1 with a backlog of $4.25 billion, up $60 million sequentially, and 2.7% from a year ago. Tuning to slide seven. I'd like to thank our people around the world for their part in delivering best-in-class mission-critical operations support over the holiday period and for achieving a high number of milestone deliveries under the many outcome-based projects and managed service engagements we are supporting for our customers. Q1 includes several important developments which fraction our underlying basis business, accelerate our global growth potential, and advance our generative AI strategy. First, I am proud to announce that we signed a new multi-year agreement with T-Mobile that includes managed services, software development, and AI innovation. Under the new agreement, T-Mobile and Amdocs will collaborate to support T-Mobile growth strategy and business objectives. Amdocs will continue to support T-Mobile's consumer and business domain, including implementation of Gen-AI technology where applicable. As part of this agreement, Amdocs will also support integration activities related to common systems. Additionally, we are supporting T-Mobile in the integration of U.S. Cellular. As a reminder, integration activities by nature are non-recurring and are ramping down by design once the integration is completed. Overall, this important agreement extends our long-standing strategic collaboration with T-Mobile. Having said that, as mentioned last quarter, we expect a revenue decline with this customer in fiscal 2026 due to a lower level of spending. We expanded Amdoc's global customer footprint and progressed our international diversification strategy this quarter through a combination of organic and inorganic moves. We signed an expanded multi-year engagement at Vodafone Germany, the largest of Vodafone operating companies, and won significant transformation awards with two new logos in Western Europe. Additionally, I am excited to report that we closed the acquisition of Matrix software for $197 billion cash at the end of Q1. Based in California, Matrix is a strategic consolidation move which complements and extends our leading market position around the controlling heel of billing, monetization, and charging solutions. As such, we believe there is an amazing potential to bring our full suite of product and managed services in support of Matrix's impressive customer base. These customers include major tier-one service providers such as Verizon, Telus, Telefonica, Swisscom, Three, Virgin Media O2, and Telstra, as well as a growing list of many smaller tiers operators and MVNOs. Third, I'm encouraged by the highly positive recognition Amdocs is receiving as a market leader in data and generative AI from customer and industry analysts like Gardner. In my opinion, such recognition directly reflects Amdorf's very deep domain expertise, which is unmatched in the telco vertical. During Q1, our commercial momentum continued with additional GenAI-related wins at Telus and other customers. Our next-generation AI platform development is also progressing to plan, with today's announcement of AOS, an agenting operation system. Purpose-based for telecommunication, which we plan to showcase at Mobile World Congress in early March. Now turning to slide eight. I'd like to provide some additional color with respect to our growth strategy, which is designed to deliver the tech-led product and services our customer needs to maximize the value of generative AI data across our customer footprint, accelerate the journey to the cloud, digitalize customer experience in consumer and B2B, monetize next-generation network investments, and streamline and automate complex network ecosystems. Starting with data and generative AI on slide 9, we are busy executing the recent GenAI-related commercial awards as we won with Optimum, Consumer Cellular, EM, Telefonica Germany, and other first mover adopters of Amdocs and Maze are generative AI platform that leverage NVIDIA's AI capabilities. These early awards provide proof points as to the important role of generative AI in telecom industry transformation, as witnessed by the consistent pipeline expansion and growing commercial progress we are seeing. As an example, Telus, Amdocs, and NVIDIA recently teamed up to deliver advanced AI powered quality engineering solution on the Telus sovereign AI factory. Specifically designed to meet Canadian data residency and compliance mandates. This strategic integration will enable secure autonomous testing, automation, and validation for Canadian enterprises and government agencies. helping them to adopt generative AI securely and to roll out digital services faster. As to our long-term generative AI strategy, last quarter we shared that we are accelerating our investment to fast-track development of Cognitive Core, a next-generation AI platform built on the foundation of Amdocs Amaze, which integrates spread-built telco-specific agent libraries and actionable insights. I'm pleased to say that our development roadmap is progressing as planned, with today's exciting announcement of AOS, the world's first agentic operating system purpose-built for telemarketing, which we plan to showcase at Mobile World Congress in Barcelona a few weeks from now. Designed to help service providers accelerate the generative AI, strategize and innovate at scale, AOS operates on top of any BSS or SS stack, embedded currently core and intended directly to telecom operation to elevate customer and employee experiences, unlock new growth opportunities, and drive measurable operational efficiency by executing complex end-to-end workflows across BSS or SS environments. Overall, we are excited by the announcement of AOS. which we believe can emerge as a long-term growth engine for Amdocs, as Telco realizes the potential to simplify and accelerate their AI transformation journey. Switching to cloud in slide 11, Amdocs remains uniquely positioned as the preferred partner to lead the Telco industry's journey to the cloud, reflecting our proven ability to accelerate public, private, and hybrid cloud migrations. We are continuing to grow our cloud migration collaboration with AT&T, supporting them as they move another key infrastructure stack to the cloud. This represents an important next phase in AT&T's cloud modernization journey. By applying MDoc's AI-driven migration capabilities and deep telecom domain expertise, we are helping AT&T modernize core infrastructure faster, reduce transformation risk, and improve operational efficiency while creating the foundation for future innovation. As discussed last quarter, our SaaS-based platform, including Amdocs ConnectX, Amdocs MarketOne, and Amdocs eSIM are also contributing to growth with rising customer adoption. This quarter, Androx Marker One was selected by V, formerly Vida, a leading smart TV platform powering over 50 million connected TVs globally. Marker One will drive V's global OTT subscription and streaming bundles on home AS-equipped smart TVs, streamlining OTT partner onboarding, enabling innovation subscription bundling, and digital services expansion across the international footprint. Looking forward, Cloud will remain primarily focused for Amdocs as we continue to support our global telco customer base, many of which are just getting started on their multi-year cloud journeys. Turning to slide 12, I'd like to spotlight some additional deals we need across Amdocs' other strategic domains this quarter. First, I'm delighted to announce that Vodafone Germany has extended its multi-year digital transformation engagement with Amdocs. As part of which, it will decommission multiple legacy technology stacks to simplify its IT infrastructure across its fragmented cable portfolio. The program will complete with a gradual migration, following proven agile delivery, running fully in public cloud, and utilizing GenAI tools to increase delivery efficiency. In Western Europe, we want significant digital transformation and work with two new logos, that further expand our strategic relationship with the large global telco service providers. In Italy, Swisscom's suspender in FastWeb will broaden its use of the OMS Amdocs platform as the unified orchestration layer to manage end-to-end order management across both wireline and wireless consumer domain in the new core, resulting for the post-measure integration with Vodafone Italy. Within the BSS and OSS sphere, Swiss service provider Sunrise has extended their collaboration with Amdoc to support AI evolution in CRM, setting the foundation for further increase its net promoter score and to offer customers the best service at any time. We also signed a new four-year agreement with Telefonica Germany to renew our Actix mobile network platform. Actix plays an important role in optimizing Renewal Network performance. helping Telefonica Germany enhance coverage and network quality at scale. This also reflects the ongoing value we deliver in mission-critical network operation, and federal students are long-term standing in collaboration with the customer. Finally, we recently signed a proof of contract with a leading operator in Japan, deploying Amdocs Revenue 1 with billing capabilities to run real operation scenarios. This engagement reinforced the skills of our revenue management portfolio in supporting complex, strategic customer environments and creates a path for potential expansion. Now, to the current operating environment. We believe many growth opportunities exist across our several addressable markets of roughly $60 billion by tapping new domains as our largest long-standing customers, capturing additional wallet share at existing customer and new logos, diversifying in new geographies such as Japan, Africa, and Middle East, and bringing innovation in emerging strategic domain such as generative AI, fiber rollout, cloud migration, and the rapidly evolving MNO segment. With our deep telco domain expertise and unique tech-led customer-based business model, we are well positioned in the market and laser-focused to monetize the rich deal pipeline we see in front of us. That said, we are, of course, closely monitoring our customer demand and spending behavior within the prevailing global macroeconomic environment. Bringing everything together on slide 14, With our solid first quarter performance and our visibility for the remainder of the year, we are reiterating our guidance for revenue growth of between 1% and 5% in constant currency for fiscal 2026. Similarly, we are on track for non-GAAP diluted earnings per share growth of between 4% to 8% in fiscal 2026. the midpoint of which equates to an expected total share of return in the high single digits, including our dividend yield. On a personal note, after many years serving Amdocs in a range of leadership roles, including more than seven years as President and Chief Executive Officer, I've decided to retire from my role as President and Chief Executive Officer. It has been the greatest privilege of my professional life to lead this incredible organization and instead of the people for the past seven years. I'm immensely proud of what we've accomplished together. We didn't just navigate and shift the cloud and the rise to Gen AI, we transform Amdocs into a truly catalyst for the digital age. I am pleased to announce that Jimmy Horvick, A long-time colleague and trusted partner who is here with me today will succeed me as the President's Chief Executive Officer effective March 31, 2026, following a planned transition period. I take this step with a deep confidence in Amdoc's position, long-term strategy, and leadership team. Having worked closely with Shimi over many years, I have seen his ability to lead the company through periods of significant industry and technological change while maintaining a strong focus on customer and execution. This planned succession reflects the depths of the strength of Amdoc's management team and ensures continuity in our strategic direction. I am confident that Shimi, supported by an experienced and highly capable executive team, will build on Amdoc's strong foundation and lead the company to new highs. I'm delighted to say that Shimi is here with me in the room today. So let me hand things over to him to say a few words before moving to Tamar.

Thank you, Shuki, for the kind words and for our partnership over the years. I'm excited to lead Amdocs to the next chapter. During my career at Amdocs across different leadership roles, I have come to appreciate what makes Amdocs a leader. Our people and culture, our customer trust, and our technology innovation. As we look ahead, mDoc is well positioned to combine emerging technologies with deep domain expertise to drive value to customers and shareholders. I'm looking forward to building on everything we have accomplished and taking mDocs to the next level.

Thank you, Shimi. And with that, let me turn the call over to Tamar for her remarks.

Thank you, Shuki. And hello, everyone. Thank you for joining us. And Shimi, best of success. Thank you. To begin, I'm pleased with our solid financial performance for the first fiscal quarter, summarized on slide 17. Q1 revenue of approximately $1.156 billion was up 3.5% year-over-year in constant currency. Revenue was slightly above the midpoint of our guidance, even after unfavorable foreign currency movements of roughly $3 million compared to our guidance assumptions. On a reported basis, revenue was up 4.1% from a year ago. Revenue from acquisition of matrix software was immaterial in Q1 since the deal closed in the last week of the quarter. On a regional basis, North America was up nearly 4% from a year ago and was higher on a sequential basis for the fourth consecutive quarter. Europe was up by 17% year-over-year and increased by 1% sequentially, driven by organic growth initiatives and the December 2024 acquisition of Profinit, which made little contribution to the year-ago quarter. The rest of the world was down from a year ago, but improved slightly as compared to the prior quarter. Consistent with our prior guidance, our strong sales momentum provides clear visibility to continued growth in the rest of the world this year, as we remind you that quarterly trends may fluctuate given the project orientation of our customer activities in this region. Shifting down the income statement, Non-GAAP operating margin of 21.6% improved by 40 basis points from a year ago and was stable on a sequential basis as we continue to balance the benefits of internal cost and efficiency initiatives to the investments designed to accelerate our long-term growth, including the development of our next-generation AI platform. Interest and other expenses amounted to roughly $10 million this year. On the bottom line, Non-GAAP diluted EPS of 1.81%, was above the guidance range, primarily due to a lower than expected non-GAAP effective tax rate in the quarter. Similarly, diluted GAAP EPS of $1.45 exceeded the guidance range, which was also primarily due to a lower than expected GAAP effective tax rate in the quarter. Additionally, diluted GAAP EPS included a restructuring charge of roughly 9 cents per share, which was not included in our guidance for the quarter. Turning to slide 18, managed services revenue of $746 million was up 2.3% from a prior year in the first fiscal quarter. As a share of total revenue, managed services accounted for roughly 65%, consistent with the last several quarters. During Q1, we maintained a very high managed services renewal rate, signing expanded multi-year engagements, which together strengthened our business resiliency. In addition to the new agreement, with T-Mobile and the new agreement with Vodafone Germany, we signed an agreement with Telefonica Mobile Argentina covering product maintenance services, application managed services, and our software factory. Moving to the balance sheet and cash flow highlights on slide 19, DSO of 76 days decreased by five days from a year ago and was up by two days sequentially. And billed receivables net of deferred revenue was down by 32 million sequentially, and by 66 million versus a year ago in Q1, aggregating the short-term and long-term balances. As a reminder, the net difference between unbilled receivables and deferred revenue fluctuates from quarter to quarter in line with normal business activities, as well as our progress on multi-year engagements. Free cash flow before restructuring payments was $237 million in Q1, driven by strong earnings-to-cash conversion to begin the year. In fact, Q1 free cash flow already equates to roughly 33% of our full-year target, which is higher than usual after just one quarter. Including restructuring payments of $49 million, reported free cash flow was $188 million in the quarter. We ended Q1 with a healthy cash balance of approximately $248 million and aggregate borrowings of roughly $780 million, including a drawdown of $130 million on our $500 million revolving credit facility to fund the acquisition of Matrix Software and our $650 million senior note, which matured in June 2030. Overall, we have ample liquidity to support our ongoing business needs while retaining the capacity to fund our future strategic growth. Switching to capital allocation on slide 20, this quarter we repurchased $146 million of our shares. We had up to $840 million of remaining purchase authority as of December 31st, 2025. We paid cash dividends of $57 million in the first fiscal quarter. Looking to fiscal 2026, we are on track to generate free cash flow of between $710 to $730 million, not including payments we expect to make under our current refactoring program. Our free cash flow outlook equates to a conversion rate of roughly 90%. relative to expected non-GAAP net income, and translates to a healthy free cash flow yield of roughly 8% relative to our current market capitalization. Regarding our capital allocations for the coming year, we expect to return the majority of our free cash flow to shareholders. Moving to slide 21, 12-month backlog was $4.25 billion at the end of Q1, up $60 million sequentially, and 2.7% from a year ago. Now, turning to our revenue outlook on slide 22, we are continuing to closely monitor the prevailing level of macroeconomic, geopolitical, business, and operational uncertainty in the current business environment. The second quarter and full fiscal year 2026 financial guidance reflects what we consider to be the most likely outcome based on the information we have today, but we cannot predict all possible scenarios. For the full fiscal year 2026, we expect revenue growth of between 1.5% and 5.5% as reported, roughly half of which will be inorganic in nature. This includes the acquisition of matrix software, which was already incorporated in our assumptions when we provided our fiscal 2026 guidance last quarter. This expected range compares with 1.7 to 5.7% previously, with a change reflecting foreign currency movements, which are now assumed to provide a benefit of 0.5% for the full year as compared to 0.7% previously. For the full fiscal year 2026, we are reiterating our outlook for revenue growth of between 1% and 5% in constant currency. As for the second fiscal quarter, we expect revenue of between 1.15 billion to 1.19 billion. Moving down the income statement, we are on track to deliver non-GAAP operating margins within our target range of 21.3% to 21.9% in fiscal 2026, the midpoint of which is roughly 20 basis points higher than the prior year of 21.4%. Our profitability outlook reflects an intentional decision to accelerate our R&D, sales, and marketing investments with respect to generating AI and our next-gen agentic operating system. while balancing this with ongoing cost and efficiency gains resulting from our continuous focus on operational excellence, automation, and the excellent deployment of generative AI-based tools across our business. As a reminder, our non-GAAP operating margin may fluctuate slightly on a quarter-to-quarter basis. Additionally, our margin outlook excludes additional refactoring charges we may fix. Below the operating line, we expect non-GAAP net interest and other expenses to be impacted by higher finance costs this year, resulting from a reduced cash balance and funding of our strategic long-term growth plan. As anticipated in the beginning of the year, we expect our non-GAAP effective tax rate to be within an annual target range of 16% to 19% for the full fiscal year 2026. For your modeling purposes, in Q2 specifically, we expect our non-GAAP effective tax rate to be above the high end of this annual range. Bringing everything together on slide 24, we are reiterating our outlook for non-GAAP diluted earnings per share growth of 4% to 8% in fiscal 2026, the midpoint of which positions us to deliver a high single-digit expected total shareholders' return when including our dividend yield of around 2.7%. With that, back to you, Shopee.

Thank you, Tamar. I am pleased with our solid start for the fiscal year and the important progress we've made in respect to our long-term strategic partnerships, the expansion of our customer base globally, and today's announcements for our new agent incorporation system, AOS, which we believe can provide an additional engine of the long-term goals. With that, we are happy to take your questions.

Certainly. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. We ask that you please limit yourself to one question and one follow-up. Our first question for today comes from the line of Shlomo Rosenbaum from Stifel. Your question, please.

Hi. Thank you very much for taking my questions. Shuki, Tamar, just the T-Mobile announcement obviously is significant positive. Everyone's kind of waiting for this renewal. I was wondering if you could give us just a little bit more color on that because it's just discussed as a multi-year agreement. It doesn't say, you know, how long it is. You know, how can we compare this to the prior agreement? I know you talked about revenue being down in 26. Is there a continued trajectory that way or should we assume there's a new baseline? And just, you know, is the scope the same of what you were doing? You know, there's T-Mobile in the third quarter announced a very sizable charge against its, you know, its billing system. including what seems like, you know, stuff that was still in development. And maybe you could just kind of put a, you know, just a finer point on what's going on over there, since it is a very significant client. And then I have one follow-up. Thank you.

Sure. Hi, Shamo. So let me try and give some more color. We're talking about a five-year agreement. This is quite typical for a long-term services engagement and additional long-term engagement with the top customers. We are covering in this agreement, as we indicated, managed services. We are covering development services, some AI-related activities, integration of common systems. So there's plenty of, I would say, breadth to the engagement that is covered there. We are also indicated beyond this agreement that we are going to support in the integration of US Cellular. which is, of course, a strategic move that T-Mobile announced already in the past. We feel that the relationship, of course, needs to take that to continue to support the T-Mobile goals. We know it's going to support T-Mobile both on the consumer side of the business as well as the support of the business segment of T-Mobile. We continue to see specifically we're guiding now for 2026, so we're talking about the fact we want to be very transparent about the fact we still expect revenue to decline in 2026 as we're spending appetite is lower. Not just with that. I think if you look into the commentary of T-Mobile, they are much more cautious. And the other point that we say is that specifically, again, it's so specific to the contracts. It's just to remind you that the kind of work we do for integration of systems, like the one we are doing with is one that is typically not, you know, it's not recurring by nature. Integration has a beginning and an end. I mean, hopefully, of course, it will be successful. And therefore, we wanted to make it clear this is not that we're talking about multi-year agreements and other activities with T-Mobile. Integration of your cellular is not a five-year thing, right? Usually integration is measured by quarters rather than years. Okay, thank you.

Overall, I agree with what Tamar said. I think we have a relationship with T-Mobile. The previous version since 1999, so I think this is extend our partnership with T-Mobile for T-Mobile for years to come.

Okay, thank you. And then just I want to dig in a little bit more on the matrix acquisition. Just you guys, you already bought a charging platform. We opened that like five years ago. And I want to ask just what strategically, you know, is this adding to what you had? And, you know, if you could put a finer point onto the revenue that you're expecting from it this year, is it, you know, if I take kind of the midpoint of your revenue guidance, assume half of it is, you you know, coming from acquisitions and, you know, and kind of split that over three quarters. Sounds like it's like around the 90 million run rate business. Is that the way to think about it?

I will start with the value of the products and tomorrow we will answer more of the financial questions. Look, we are dealing across the world with different sizes and different complications of customers. Some of the tier one Customer need different type of charging and capabilities comparing to what we call low tiers or mid tiers. So I think the rationale of this acquisition was also it was consolidation of a competitor with very strong product. So I think the rationale, A, it give us additional charging engine that we can, it's more like what we call tier two level rather than tier one. This is one. It gives us a very nice set of customers, as we mentioned. And I think that between all our capabilities, I think it strengthens our position and by far the market leader in this critical domain of charging and monetization.

Yeah, maybe just to add, you mentioned the acquisition five years ago of OpenEdge. OpenEdge is an amazing solution. that we see in many leading customers, and of course, we continue to be our solution for the high scale. Back to your point about the revenue contribution coming from M&A, so we did incorporate in the original guidance of the year about half of our growth coming from M&A, and Matrix was definitely mature in the pipeline of M&A when we gave that guidance. That's why I wanted to emphasize that it was planned and now it's materializing. Now, relative to the model of VAMDO, Matrix is a product, software product company. So, less visibility into the model than our own regular model. We have taken that into consideration, of course, being the first year of integrating Matrix, we want to be more cautious on the revenue view. So, I think we are conservative there. So, yes, it's in the numbers. It's not necessarily the end of the M&A plans that we have for the year. We don't have any major buildup of expectations in terms of numbers. I'm not talking about revenue. I'm just talking about the fact we do see also additional pipeline of good ideas on the M&A side that we may execute upon. But as I always say, M&A is not something you can plan for in a linear way. You want to do the right deals for the right reasons with the right prices. So, I think we're building this in a very prudent way into our guidance.

Thank you. Thank you. Thank you. And our next question comes from the line of Dan McDermott from Oppenheimer. Your question, please.

Hi, guys. Dan on for Tim Horan. Thanks for taking our questions. Just two quick ones. Can you give us some more color on your new authentic operating system you announced today? You know, why it's unique? how it can serve as a new growth engine. And then second, Verizon has been very vocal about aggressively cutting expenses. We were wondering if you were doing anything there to help them with their restructuring and their AI initiatives.

Thanks again. So what we call, hi, AOS, the Argentine Cooperative System. And if you remember last quarter, we started to talk about this, that we are developing a next generation platform for AI. At the time, we talk about calling the core, which is part of the overall AOS. And in a simple way, and I want to become an architectural discussion, it's a layer that can sit on top of any BSS, OSS infrastructure and actually can provide with obviously giving our knowledge of this very deep, intimate knowledge of this industry. We are building an agenting platform that actually eventually you can operate all the activities for agents. And we are going to showcase this in Barcelona, meet with many customers. So today we are announcing it, and the full showcase will be about three months from now. And we believe this will, in the future, will serve us as a new growth engine for Amdox. We did not include any significant revenue for this in this fiscal year, but we believe that from everything that we hear in the industry, this is going to be probably the most, I would say, prominent and strong foundation to leverage Gen AI, and we are very proud what we are in the process of building. Regarding Verizon, I cannot comment more that you need to assume that we are engaging with Verizon to see how we can help them in the future.

Thank you.

And our next question comes from the line of George McNaughton from Wolf Research. Your question, please.

Hi, guys. This is Taron on for George. Could you talk a little bit more about how the telcos are progressing in terms of looking to accelerate and simplify their AI journey? Specifically, can you talk about how the pipeline is progressing and any new opportunities that have popped up for you?

I think overall, and definitely we talked about this before, we were very active in working with our customer, you know, developing different use cases in the call center, in the retail store, or any upsell or care type of scenarios. But this was more, I would say, a different solution to different needs. different use cases. The difference with the AOS, it is a complete holistic value proposition to address all what we believe the future telecom needs to leverage this technology. All our customers obviously are trying successfully in many cases to leverage this, but it's more, I would say, it's like moving from opportunistic to strategic, from a different use cases and different capabilities that all our customers are already experiencing both in the IT and the network domain to a much more holistic value proposition that actually will translate or converge in the future the way our customer working to a full agentic way. So this is the difference from what we've done so far to this DAO solution. But, obviously, early days, I mean, most of our customers, as I said, are trying. We do a lot of POC. In many cases, also, they are getting some value, but I think this is very, very, very early days in this domain.

Great. Thanks. Thank you. And as a reminder, ladies and gentlemen, if you have a question at this time, please press star 11 on your telephone. Our next question comes from the line of Taliani from Bank of America. Your question, please.

Hey, guys. This is actually Tomer Zilberman on for Tal. Maybe two for me. You mentioned in the prepared remarks that you had a slight beat to your expectations this quarter on revenues, and your 2Q guidance was also slightly above the streets. but you were consistent in maintaining the fiscal year. I just wanted to ask if this is more about right sizing when you expect the ramp down of T-Mobile revenues this year, if there's anything else to look there. And my follow-up is, as we think about this new multi-year agreement with T-Mobile, can you give us a sense of, you know, the progression and the trajectory of the milestones you need to hit to really ramp the revenues there? Thank you.

So on the first question, it's not anything specific in particular. It's not a customer that caused that. Actually, I'm happy about the fact that we were able to show now faster performance on the revenue to meet the numbers. You know, we talked in the beginning of the year of a stronger half two than half one, but even then it wasn't like a big difference. So I would say it's a slight change and nothing in particular that I can point out that caused that. On your second question, it's not a matter of meeting a specific deliverable that is singular in nature. What we do for T-Mobile is including many activities. So we are doing the managed services that covers the ongoing IT operations. We are doing development work. Some of it is new projects oriented. Some of it is helping them to enhance existing systems. We are going to embed new AI activities. We are doing the US solar integration. We are going to help with other specialization of common systems. So it's many, many things. It's not like a single project that I can point to a specific milestone. So it's mainly a matter of continuing to execute, bring value, and push forward to the demands and the desires of Timbuktu.

Understood. Thank you.

Thank you. Thank you.

This does conclude the question and answer session of today's program. I'd like to hand the program back to Matt Smith for any further remarks.

Okay. Thanks, Operator, and thanks, everyone, for joining the call tonight. If you do have any additional questions, please give us a call in the IR group here. And with that, have a great evening.

Thanks. Thank you. Ladies and gentlemen, for your participation in today's conference, this does conclude the program. You may now disconnect.

Good day.